Economic conditions becoming favourable for RBI to cut rate: Mayaram

Chennai: A day ahead of the RBI's monetary policy announcement, Finance Secretary Arvind Mayaram today suggested that the economic conditions were becoming favourable for cut in interest rates.

"Conditions are becoming favourable for a more benign monetary policy going forward in this year," he said at a function of the Madras Chamber of Commerce & Industry here.

Mayaram argued that the wholesale price (WPI) inflation is at the lowest level since October, 2009 and retail inflation (CPI) is less than 8 per cent which is the targetfor this year according to a RBI panel report.

Arvind Mayaram. Reuters

He further said that Current Account Deficit(CAD) has been brought down substantially and this has also been acknowledged as of the key credit strength by S&P in its recent report.

The Reserve Bank, which has kept key interest (repo rate) high at 8 per cent for quite sometime now, is scheduled to come out with its fourth bi-monthly credit policy tomorrow.

The Finance Secretary also exuded confidence that Indian economy will clock a growth rate in the range of 5.7 to 5.9 per cent during the current fiscal year 2014-15. The GDP had slumped to sub-fiv per cent growth in the previous two financial years.

"An upgrade by S&P in the overall outlook from negative to stable reaffirms the fact that the health of the economy is in a much better condition than it was a year ago," he said.

Noting that in the past, large projects had come to standstill and many others were stressed on "slow decision making and paralysis", Mayaram said infrastructure development is one of the foundations on which the present Government wants to accelerate growth and create job opportunities.

"Signs of recovery are visible in the sector, albeit slowly," he said.

Mayaram said investment data in September 2014 shows an uptick with a growth of 9.8 per cent as against 6.7 per cent growth during the same period in the last fiscal year.

Mayaram expressed confident that the steps taken by the Government to distress projects and simplify decision making will show increasingly better results in the coming quarters.

"This is also getting reflected in how the markets are performing and the receipt of the foreign inflows in the economy both in the form of FDI and FII," he said.

FII net investment in Indian markets since the beginning of 2014 have reached $34.2 billion compared to the $12.13 billion in the entire year of 2013.

The net FII investment in the debt side is $19.9 billion and in the equities markets is $14.2 billion.

Total FDI flows into India for the period in April-July 2014, stood at $14.6 billion compared to $11.7 billion during the same period a year ago.

Mayaram also said the Government is confident of meeting its target of fiscal deficit of 4.1 per cent this year.

While addressing the issue of quality of expenditure, he stated that the Government has already constituted the Expenditure Management Commission (EMC) which would give its first report by the end of this year.

He also said this Government is committed to an early roll-out of GST, providing gainful employment to its youth through its skill development programme, fast tracking work on Industrial Corridors and bringing in the requisite amendments in the Land Acquisition Act to expedite project clearances.

On ease of doing business, Mayaram said that whereas some of the Central Government policies and processes need to be changed and the revision is underway, most of the action lies with the states.

He suggested that the Chamber must recommend laws under which the State Governments can move towards self certification or third party certification for giving clearances and approvals.

PTI

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